How to increase production capacity: 5 effective strategies

Scaling an ecommerce business is a complex yet crucial endeavor. As a company expands, it is often met with an escalating demand for its products or services. However, failing to match this demand by not increasing production capacity properly can lead to many operational issues, such as stockouts, delayed deliveries, and increased costs. These issues can significantly tarnish the reputation of a business, leading to decreased customer satisfaction and potential loss of market share.

The solution to these challenges is simple. You should implement effective strategies to increase production capacity. By doing so, ecommerce businesses can ensure they can meet increasing customer demand while maintaining operational efficiency and quality. This article delves into the lean manufacturing principles and five practical strategies to increase production capacity and scale your ecommerce business.

• Production capacity, the maximum output an ecommerce business can achieve, influences the business's ability to meet customer demand, control costs, and drive profitability. It encompasses the entire supply chain, from procurement and manufacturing to storage, order fulfillment, and delivery.

• Increasing manufacturing production capacity is vital for scaling ecommerce businesses, allowing them to meet growing demand, maintain operational efficiency, enhance market competitiveness, and boost profitability.

• Key strategies to increase production capacity include streamlining operations with technology, optimizing inventory management, enhancing supply chain efficiency, upgrading or expanding physical resources, and adopting print on demand services.

• Calculating production capacity involves identifying key constraints, measuring current output, considering peak times and seasonality, and regularly monitoring and adjusting capacity to ensure optimum performance.

• In the dynamic world of ecommerce, it's essential to regularly review and adjust production capacity, use demand forecasting tools, and maintain flexibility in production capacity to meet varying demands while optimizing costs and resources.

In the ecommerce sector, production capacity measures a business's ability to produce and deliver products or services over a certain period. It's not just the ability to create a product but also the capability to fulfill orders and provide customer services. Production capacity is the maximum output an ecommerce business can achieve under optimal conditions.

Production capacity for ecommerce businesses is more comprehensive than just the manufacturing process or sourcing of goods. It encompasses every supply chain step, from procurement of raw materials or goods to storage, order fulfillment, shipping, and delivery. For example, a manufacturing business could have the capability to produce or procure 100 units per day. Still, if its shipping capacity is only 50 units per day, its effective production capacity is just 50. 

Measuring production capacity is vital for understanding a business's ability to meet demand. It helps identify bottlenecks, optimize resource allocation, and improve efficiency. Knowing your maximum production capacity limits allows you to plan better, avoid stockouts, and reduce lead times. It also aids in forecasting, ensuring you can scale operations in line with market growth. 

Moreover, accurate capacity measurement can enhance customer satisfaction by ensuring timely deliveries and maintaining product quality. Hence, you must regularly track production capacity to identify inefficiencies and optimize resource allocation for improved operational performance, strategic decision-making, cost management, and sustained business growth.

Increasing production capacity is an essential strategy for scaling ecommerce businesses. As the business expands and customer demand grows, the ability to meet this demand becomes crucial. According to Forbes, ecommerce sales are expected to grow 8.8% in 2024.

Below are its advantages:

• Meeting increased demand: As an ecommerce business grows, the demand for its products or services often escalates. Without a corresponding production capacity increase, this surge in demand could lead to stockouts or delays in delivery, negatively affecting customer satisfaction. An adequate increase in production capacity ensures that the business can promptly cater to greater customer demand, maintaining customer satisfaction and loyalty.

• Maintaining operational efficiency: Higher demand strains existing operations if not managed well. Scaling production capacity helps maintain efficiency, ensuring timely order processing, packaging, and shipping. This may involve investing in advanced technology, increasing labor, or improving supply chain management, reducing the risk of bottlenecks and errors.

• Enhancing market competitiveness: In the highly competitive ecommerce landscape, businesses that can quickly and efficiently fulfill customer orders often have a competitive edge. With increased production capacity, an ecommerce business can cater to a larger customer base, potentially entering new markets. Moreover, a business that can maintain a high level of service even during peak demand periods will stand out from its competitors, enhancing its market competitiveness.

• Boosting profitability: Scaling production increases sales volumes, leading to higher revenue. Improved operational efficiency and better procurement can decrease costs per unit, enhancing profit margins.

Accurately calculating production capacity is essential for effective business planning and growth. Let's explore various methods to determine production capacity, helping businesses optimize resources, meet demand, and maintain operational efficiency in a competitive market.

Machine-hour capacity calculation

Machine-hour capacity calculation is vital for determining a business's production potential. It involves calculating the total hours machines are available for production within a given period. Here's a simple production capacity formula: To start, identify the number of machines and their daily operational hours. Multiply this by the number of working days in the period.

For example, if a factory has 10 machines running eight hours a day for 20 days a month, the machine-hour capacity is 1,600 hours per month. This metric helps in planning production schedules, identifying bottlenecks, and ensuring efficient use of machinery to meet demand effectively.

Labor capacity calculation

Labor capacity calculation is a method used to determine the maximum output a workforce can achieve within a given timeframe. It involves assessing the number of workers, their productivity rates, and the hours they can work. By calculating labor capacity, businesses can identify if they have sufficient workforce to meet outsourcing production goals. Factors like employee skills, work shifts, and potential overtime are considered. 

This calculation helps plan workforce needs, schedule shifts efficiently, and identify gaps that may require additional hiring or training. Accurate labor capacity assessment ensures optimal resource utilization, improving overall production efficiency and effectively meeting demand.

Production line capacity

Production line capacity refers to the maximum output a production line can achieve under optimal conditions. It’s crucial for ensuring that a business can meet demand without delays. By assessing production line capacity, businesses can identify bottlenecks, streamline processes, and plan for future growth. Factors influencing capacity include machinery efficiency, labor productivity, and supply chain reliability. 

Regular evaluation helps make informed decisions about equipment upgrades, workforce training, and process improvements. Ultimately, understanding production line capacity enables businesses to maintain high efficiency, reduce downtime, and ensure consistent product quality, leading to better customer satisfaction and increased profitability.

Capacity utilization rate

Capacity utilization rate measures how effectively a business uses its production capacity. It is calculated by dividing actual output by potential output and multiplying by 100 to get a percentage. A high utilization rate indicates efficient resource use, while a low rate suggests underutilization. Monitoring this metric helps businesses identify inefficiencies, plan for expansion, and optimize production processes. 

By maintaining an optimal capacity utilization rate, companies can balance demand and supply, reduce costs, and improve profitability. Understanding and managing this rate is crucial for maintaining competitiveness and ensuring sustainable growth in any industry.

Rough-cut capacity planning (RCCP)

Rough-cut capacity planning (RCCP) is a vital technique for managing production capacity in manufacturing and ecommerce. It involves creating a high-level plan to assess whether a business's resources can meet future demand. RCCP focuses on key resources such as labor, machinery, and materials, providing a broad overview rather than detailed scheduling.

This method helps ensure that production remains aligned with demand, preventing overcommitment and underutilization. RCCP is essential for maintaining efficiency, optimizing operations, and supporting strategic planning and growth.

Overall equipment effectiveness

Overall Equipment Effectiveness (OEE) is a vital metric for assessing manufacturing productivity. It identifies and eliminates inefficiencies by measuring the percentage of manufacturing time that is truly productive. OEE considers three factors: availability, performance, and quality. Availability measures downtime, performance assesses the speed of operation, and quality examines the rate of defective products.

By monitoring these elements, businesses can optimize their processes, reduce waste, and enhance production efficiency. Regularly analyzing OEE helps pinpoint areas for improvement, leading to cost savings and increased profitability. It is an essential tool for maintaining a competitive advantage in the manufacturing industry.

Follow these steps to maximize productivity and streamline your production process.

1. Determine machine/equipment availability

Determining machine and equipment availability is crucial for the accurate calculation of production capacity. Understanding your machines' operational time allows for better scheduling and utilization. Here are simple steps to help you assess equipment availability effectively:

• Identify total available time: Calculate the total number of hours each machine can run during a given period.

• Account for planned downtime: Subtract scheduled maintenance, breaks, and holidays from the available time.

• Record unplanned downtime: Track any unexpected stoppages, such as repairs or adjustments, to get a clearer picture of availability.

• Calculate net available time: Subtract planned and unplanned downtime from the total available time to find the available time for production.

2. Calculate effective working time

Calculating effective working time is essential for understanding how much productive time is available in your manufacturing process. This helps in production capacity planning, calculating scheduling, and maximizing efficiency. Follow these steps to determine your effective working time:

• Determine total shift time: Start with the total hours in a shift.

• Subtract breaks: Deduct the time allocated for lunch, tea breaks, and other rest periods.

• Account for setup and cleanup: Remove the time spent setting up machinery and cleaning up after shifts.

• Include downtime: Factor in any expected downtime due to maintenance or unexpected stoppages.

3. Determine the production rate

Determining the production rate is essential for understanding how efficiently your manufacturing processes are operating. This rate measures the number of units produced over a specific period, helping identify bottlenecks and areas for improvement. 

Here's how to determine the production rate:

• Measure output: Record the units produced during a set time frame.

• Calculate time: Determine the total production time, excluding any downtime.

• Production rate formula: Divide the total output by the total production time.

• Analyze results: Compare the production rate against benchmarks to identify potential improvements.

4. Calculate the individual machine capacity

It's essential to break down the process into manageable steps to calculate the individual machine capacity accurately. This approach ensures precision and helps in optimizing machine utilization. 

Here’s a step-by-step process:

• Determine the machine’s operational hours: Calculate the total available hours the machine can operate in a given period.

• Assess the machine’s efficiency rate: Measure the percentage of time the machine is productive during its operational hours.

• Identify the machine’s output rate: Determine the number of units the machine can produce per hour under ideal conditions.

• Account for downtime and maintenance: Subtract the estimated downtime and maintenance hours from the total operational hours.

• Calculate the effective capacity: Multiply the adjusted operational hours by the output and efficiency rates to get the machine’s true production capacity.

5. Determine total production capacity

Determining total production capacity is essential for ensuring that your manufacturing processes meet demand efficiently. By accurately assessing your capacity, you can plan better, allocate resources effectively, and avoid production bottlenecks. 

Here's how to calculate your total production capacity:

• Assess available machinery: Identify all machinery and equipment available for production.

• Calculate machine hours: Determine the number of hours each machine can operate within a specific period.

• Evaluate workforce capacity: Consider the number of workers and their working hours.

• Factor in downtime: Account for maintenance, breaks, and any other downtime.

• Sum up production rates: Multiply the number of machines by their production rates and available hours.

To effectively scale an ecommerce business, an increase in production capacity is vital. Here are five effective strategies to boost your production capacity:

1. Use print on demand services: Adopting print on demand services like Gelato boosts production capacity and reduces overheads for ecommerce businesses selling custom-printed products. This approach eliminates large inventory needs, reduces overstock risks, and allows easy scaling during peak times by efficiently outsourcing printing to handle high-order volumes.

2. Streamline operations with technology: Utilizing advanced technology can dramatically increase production capacity and operational efficiency. For example, an automated order management system can speed up processing and reduce human errors. Additionally, AI-powered forecasting tools can help predict future demand trends, allowing you to adjust production capacity accordingly. Leveraging robotics in warehouses for packing and sorting can also increase the speed of operations and maximize output. Therefore, investing in technology will increase production capacity and enhance the quality and speed of service.

3. Optimize inventory management: Effective inventory management boosts production capacity by maintaining optimal stock levels and avoiding stockouts and overstocking. Stockouts harm the reputation and customer satisfaction, while overstocking ties up capital and causes waste. Implementing a smart inventory system helps forecast demand, track real-time levels, and automate reorders. 

4. Enhance supply chain efficiency: Improving supply chain efficiency can significantly increase production capacity. This could involve everything from finding more reliable suppliers to implementing just-in-time manufacturing or delivery processes to improving the coordination between different supply chain stages. A more efficient supply chain can respond more quickly and flexibly to changes in demand, allowing you to decrease or increase production capacity as needed.

5. Upgrade or expand physical resources: Expanding or upgrading physical resources boosts production capacity. Investing in advanced warehousing facilities and better production equipment enables faster order fulfillment and simultaneous product processing. Though requiring significant investment, this strategy enhances capacity and efficiency, paying off in the long run.

6. Implement lean manufacturing techniques: Lean manufacturing techniques reduce waste and optimize processes. Businesses can improve productivity, reduce costs, and enhance quality by focusing on value-added activities, streamlining workflows, and eliminating inefficiencies. This strategy fosters continuous improvement, leading to more efficient and responsive production systems.

7. Invest in employee training: Employee training enhances skills and productivity, leading to more efficient operations. Well-trained employees can handle advanced equipment, improve quality control, and adapt to new processes quickly. This strategy boosts overall production capacity and fosters a culture of continuous improvement.

8. Schedule regular maintenance: Regular maintenance prevents unexpected equipment failures, ensuring consistent production capacity. By addressing potential issues early, you reduce downtime and extend machinery lifespan. This proactive approach enhances operational efficiency, maintains product quality, and saves costs associated with unplanned repairs and production halts.

9. Improve workflow design: Improving workflow design enhances production efficiency by streamlining processes and reducing bottlenecks. This strategy involves optimizing the layout, minimizing unnecessary movements, and ensuring smooth transitions between tasks. Effective workflow design increases productivity, reduces costs, and improves operational performance.

10. Improve bottlenecks in production processes: Improving bottlenecks in production processes enhances overall efficiency. Identifying and addressing these constraints can streamline workflows, reduce delays, and increase output. Implementing targeted solutions, like reallocating resources or upgrading equipment, helps eliminate bottlenecks, leading to smoother operations and higher productivity.

Scaling an ecommerce business is challenging yet rewarding. Understanding and increasing your production capacity can help you meet growing demand, enhance operational efficiency, and boost profitability.

Gelato excels in the print on demand sector. As the largest platform for local print on demand solutions, Gelato enables entrepreneurs and global brands to sell products worldwide while producing them locally in 34 countries, reaching up to five billion potential consumers. This capability allows you to increase production capacity and reduce overheads significantly.

Gelato offers free usage with subscription options like Gelato+ and Gelato+ Gold, which provide benefits such as discounted shipping, premium tools, and early access to new products, such as mugs, t-shirts, wall art, and more. These features make Gelato a strategic partner, helping turn creative dreams into reality.

Take the first step towards increasing your production capacity and scaling your business by signing up for Gelato today.

When production capacity increases, a business can produce more goods or services within a given timeframe. This enables the business to meet higher demand, potentially increasing sales and revenue.

An increase in production capacity offers several benefits, including the ability to meet growing customer demand, the potential for capturing a larger market share, improved customer satisfaction through reduced delivery times, and increased profitability.

An example of production capacity could be an ecommerce business that can process, pack, and ship 200 orders daily. This is their maximum output under optimal conditions.

Production capacity is determined by various factors, including the efficiency of the production process, available resources (like raw materials and labor), the technology used, and the efficiency of the supply chain from procurement to delivery.